Home Loan With No Credit Tradelines Mortgage Guidelines

Home Loan With No Credit Tradelines Mortgage Guidelines

This BLOG On Home Loan With No Credit Tradelines Mortgage Guidelines Was UPDATED On May 15th, 2019

By Gustan Cho

Tips In Qualifying For Home Loan With No Credit Tradelines:

Credit tradelines are active and open credit accounts such as credit card accounts, automobile loans, installment loans, leases, and other creditors who report credit payment history to the three major credit reporting agencies.

When a lender requires a certain amount of credit tradelines, they are looking for active open credit accounts that have been seasoned for at least 12 months

A lender may require for credit tradelines that have been seasoned for 24 months

Consumers who opened a credit account such as a secured credit card, that new credit account will not count towards a credit tradeline until they had it for at least 12 months

To be able to count it as a credit tradeline, consumers must have a 12-month payment history

Guidelines On Qualifying For Home Loan With No Credit Tradelines

Home buyers can qualify for a home loan with no credit tradelines.

Many mortgage lenders do not want to approve borrowers for a home loan with no credit tradelines

There is no minimum amount of credit tradelines required to get an approve/eligible per DU FINDINGS or LP FINDINGS via the Automated Underwriting System

Unless borrowers go with a lender that just go off the DU FINDINGS or LP FINDINGS, most mortgage lenders will normally require at least 3 credit tradelines that have been seasoned for at least one year

Some mortgage lenders will go as far as requiring three credit tradelines that have been seasoned 24 to 36 months

For those folks who have recently filed bankruptcy or had a foreclosure, deed in lieu of foreclosure, or short sale, I strongly recommend that they start re-establishing credit as soon as possible

This can be accomplished by getting several secured credit cards

Consumers can start developing credit tradelines if they intend on buying a home in the near future

If a bank, credit union, or mortgage banker requires borrowers they do not qualify because of not having enough credit tradelines, or no credit scores, do not give up hope.

Every lender has their own set of overlays when it comes to credit tradeline requirements

Just because borrowers do not meet one mortgage lender’s tradeline requirement does not mean that they do not qualify with a different mortgage lender

Gustan Cho Associates Mortgage News

How Do I Go About Qualifying For Home Loan With No Active Credit Tradelines?

There are situations where a person has had previous credit and credit history but has closed out all of their accounts.

By closing out their accounts, it means that they have paid off every installment loan they had and closed out all credit card accounts

These folks might have a good credit score and a good prior credit history but do not have any credit tradelines

Situations like these might become an issue but there is a positive solution

If a borrower has no active credit tradelines on their credit report, they might get a refer/eligible per DU FINDINGS and/or LP FINDINGS

This means they did not get an automated approval via the Automated Underwriting System

Just because they do not get an automated approval via Fannie Mae’s or Freddie Mac’s Automated Underwriting System does not mean that they do not qualify for a residential mortgage loan

As long as borrowers meet all other mortgage lending guidelines but cannot get an approve/eligible per DU or LP FINDINGS, mortgage loan application may qualify for manual underwriting

Manual Underwriting means the mortgage loan has to be manually underwritten

Manual underwriting files do require compensating factors

Maximum debt to income ratio cap is capped at 50% versus 56.9% debt to income ratio

With manually underwritten loan applications, there is a minimum of 3 credit tradelines required

If borrowers do not have three active credit tradelines, non-traditional credit may be used in lieu of traditional credit tradelines

What Are Non-Traditional Credit Tradelines?

Traditional credit tradelines are credit items that report to the three credit reporting agencies such as credit card payment history, auto loan history, student loan payment history, and installment loan payment history. Non-traditional credit tradelines are tradelines that do not report to the credit reporting agencies. Rental verification, utility bills, insurance payments, cell phone payments, cable tv payments are all examples of non-traditional credit tradelines. A mortgage lender needs to do a verification of these non-traditional credit tradelines and will require that you provide 12 months canceled checks and do a credit supplement and have it reported to the three credit reporting agencies.

Gustan Cho and his team of licensed mortgage loan officers and support staff are experts in originating and funding loans with no lender overlays.
Over 75% of our borrowers represents are folks who contact us because they either got a last minute loan denial or were going through major stress with their original lender